Ben Bernanke: My Work is Done Here
Posted by Larry Doyle on June 19, 2013 4:29 PM |
I just listened to the release of the FOMC’s statement and juxtaposed that with the Q/A with Big Ben.
I detected some not so subtle differences in these deliveries, and clearly the market did as well.
The markets were remarkably stable after the initial release as the Fed stated that its policy remains unchanged and there was no hint of tapering asset purchases as has been the concern since that term was used by the Fed a month ago.
The statement had a mildly positive spin on the economy but nothing overly exuberant as to serve as a warning sign that the Fed might begin to pull in on the reins so to speak. In fact, the rate of inflation remains well below the long term target of 2% so that should actually allow greater leeway for the Fed to stay the course with its current policy.
Then the afternoon took a decidedly different turn of events.
The FOMC statement is a compendium of all the inputs provided by Fed governors.
Bernanke put his own stamp on today’s delivery during the Q/A when he indicated preemptively that the projection for unemployment approaching the 7% rate near year end would serve not as a trigger but a threshold for the Fed to take its foot off the quantitative easing pedal somewhat, if (and this is a big IF) inflation were to be approaching the 2% target. Markets for both stocks and bonds started heading south when Big Ben made that remark and ended near session lows.
There are a whole lot of BIG IFs involved in the scenario laid out in Bernanke’s remarks.
I personally think Bernanke is concerned that risk markets in general (equities, high yield bonds) have exceeded his hopes and expectations and without describing them as overly exuberant — as a prior Fed chair had done — I think he views them as frothy or bubble-like.
More than that, though, I personally think Bernanke is looking to make a public statement that, having taken our economy down the unconventional road known as QE, he is now looking to set a timetable when we may begin to move off that path even if only so slightly.
In so many words, Bernanke can then close the book on his career as Fed chair, declare victory in regard to his own work, and state “my work here is done.”
None of this may actually come to pass. The flights and fancies of our economy in terms of growth, inflation, and market moves far exceed the ability of even the world’s most influential central banker to control, but today strikes me as more about Bernanke projecting the closing chapter on his own tenure so he can then turn the reins over to the next Fed chair.
What do others think?
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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.